U.S. stock gauges rallied Wednesday, booking a fourth consecutive gain after investors shook off initial anxieties prompted by a key consumer-inflation reading that showed the strongest monthly rise in five months.

Wall Street had fretted that the Federal Reserve would feel compelled to act aggressively to tamp down rising prices by hiking rates at a rapid clip in 2018.

However, those jitters subsided as investors shifted to focus on healthy earnings and an economy that appears to be relatively solid, underlining the view that a weekslong downdraft for equities was abating.

The advance for the three main benchmarks was the lengthiest in about five weeks, according to FactSet data.

What’s driving markets?

Inflation scares that were responsible for the stock-market tumble over the past few weeks made a brief appearance Wednesday with the release of consumer-price index data. But the main equity gauges recovered from the initial shock to trade higher.

The cost of rent, clothes, gasoline, health care and auto insurance all rose, contributing to the 0.5% jump in the consumer-price index. Core inflation, which strips out volatile food and energy prices, rose by 0.3%.

Analysts said stronger inflation data may force the Fed to be more aggressive in tightening policy, which can undercut buying in stocks.

Despite the inflation rise, the overall picture hasn’t changed much, market participants said. The year-over-year increase in the CPI was unchanged from December at 2.1%. The 12-month rate of core inflation was also flat at 1.8%, slightly below the Fed’s 2% annual target.

The rally for equities also came as a closely watched gauge of volatility on Wall Street retreated below its historic average at 20. The Cboe Volatility Index
VIX, +1.73%
, which reflects bullish and bearish options contracts on the S&P 500 and typically moves inversely to stocks, sank 2% to 19.24. Volatility has been resurgent amid concerns about rising yields and inflation.

“Clearly with this kind of a movement for the fourth day in a row, it does appear that it’s reasonable to assume that the worst is over at this point,” said Randy Frederick, managing director of trading and derivatives at Schwab Center for Financial Research, referring to the recent pullback for stocks that brought the main benchmarks down more than 10% from their peaks in late January.

Frederick said the S&P 500 is finding some technical support at its 100-day moving average at 2,644,52. Market technicians look at moving averages to gauge short-term and long-term trends.

“What’s different about the moves today than what we’ve seen over the last two weeks is that we have broken the correlation between the yield of 10-year and the stock market,” said Art Hogan, chief market strategist at regional broker B. Riley FBR, referring to the market’s tendency to lose altitude as yields rose, reflecting climbing borrowing costs for corporations.

“Anything with inflation seems like a hot button nowadays, but it is a bit of a red herring here: Higher inflation and higher rates are symptoms of economic health. And while inflation is rising, it’s still below trend,” said Karyn Cavanaugh, senior market strategist at Voya Financial.

“At this point it’s not inflation but reflation, and the Fed will not pull the trigger that fast,” said Cavanaugh.

The Fed’s hand “may be forced if data on inflation continues to come in higher than expected. The added risk is that the [Federal Open Market Committee] in 2018 is not the same as the FOMC in 2017, we have a lot more hawks in the committee,” said Kristina Hooper, chief global market strategist at Invesco.

What other data are in focus?

Meanwhile, instead of a forecast rise, sales at U.S. retailers fell by 0.3% in January — the biggest drop in almost a year — largely because of declines at auto dealers and home centers. And a previously reported increase in sales in December was wiped out.

In other data, business inventories in the U.S. rose 0.4% in December after a similar gain in the prior month.

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shares jumped about 3% after the New York Times reported that the company has lured one of Hollywood’s top TV hitmakers, producer Ryan Murphy, in a deal worth as much as $300 million.

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